http://www.bailii.org/ew/cases/EWHC/Comm/2009/B4.html
Richard Siberry QC (instructed by Holman Fenwick Willan) for TS Lines, the
Owners
David Goldstone QC (instructed by Mays Brown) for Delphis, the Charterers
Michael Davey (instructed by More Fisher Brown) for Ulrike F Kai Freese GmbH
& Co KG, the Sub-charterers (collectively the Charterers)
TIME CHARTERPARTY: AMENDED NYPE 93 FORM: OFF-HIRE CLAUSE: CHARTERERS’ RIGHT TO
CANCEL IF VESSEL OFF-HIRE FOR 20 CONSECUTIVE DAYS: CHARTERERS ORDERED VESSEL
FROM YOKOHAMA TO SHANGHAI: VESSEL DAMAGED AND OFF-HIRE IN YOKOHAMA: VESSEL
ORDERED BY OWNERS/CLASS TO REPAIR YARD IN GUANGZHOU VIA HONG KONG TO DISCHARGE
ENTIRE CARGO: VESSEL ON "COMMON ROUTE" FOR HONG KONG AND SHANGHAI FOR
1½ DAYS: WHETHER VESSEL WAS OFF-HIRE FOR 20 CONSECUTIVE DAYS OR BACK ON HIRE
WHILE ON "COMMON ROUTE"
Summary
For the purpose of determining whether a vessel remained off-hire for a
consecutive period of 20 days, thereby entitling the Charterers to cancel the
charter when the vessel was next cargo free, where the vessel had for a period
of time travelled along a common route to a final destination other than that
specified by Charterers’ orders, the vessel remained off-hire for the time she
travelled along the common route because she was being used for the Owners’
purposes at that time and contrary to the Charterers’ purposes.

Background
The Owners time chartered their vessel to the Charterers for use in a
containerised liner service operated by the Charterers between Asian ports.

The vessel, following discharge and loading in Yokohama, was
ordered by the Charterers to proceed to Shanghai as her next port of call in the
liner service. On leaving Yokohama early in the morning of 6 September 2007, the
vessel anchored at the master’s behest due to his concern that she would be
struck by an impending typhoon during her voyage to Shanghai. Whilst still at
anchor, the vessel, in the early hours of 7 September, dragged her anchor and
struck a nearby breakwater, sustaining substantial damage. The vessel was
inspected at Yokohama by her Classification Society ("Class"), which
imposed on her a condition that she sail directly to Hong Kong to discharge the
entire cargo before going to Guangzhou for repairs. The vessel left Yokohama for
Hong Kong around mid-morning on 22 September 2007.

"Any time lost, either in port or at sea, deviation from
the course of the voyage, or putting back whilst on voyage caused by … an
accident or breakdown to the vessel, the hire shall be suspended from the time
of inefficiency in port or at sea, deviation or putting back, until the vessel
is again efficient in the same or equivalent position, whichever is the shorter
distance to the port where the vessel is originally destined, and the voyage
resumed therefrom ..." ("Clause 57")

"Unless caused by Charterers' servants, if the vessel is
off-hire… for a period of 20 consecutive days… then the charterers have the
option to re-deliver the vessel when next cargo-free". ("Clause
81")

The Charterers cancelled the charter pursuant to Clause 81 on
28 September 2007, relying on what they asserted to be a consecutive period
of off-hire under clause 57 since 7 September 2007. The Owners disputed the
Charterers’ right to cancel. The issue in dispute before the Commercial Court
came by way of an appeal under s.69 of the Arbitration Act 1996 from a
consolidated arbitration award in which the LMAA arbitrators (Bruce Harris and
John Schofield) had found in favour of the Owners. The court had to decide
whether or not the Charterers were entitled to cancel the charter under Clause
81.

The onus was on the Charterers to bring themselves within the
beneficial exemption of Clause 57. The Judge was satisfied, however, that the
vessel was off-hire for 20 consecutive days. The Charterers were accordingly
entitled to cancel the charter under Clause 81 once the vessel next became cargo
free, as they had.

The crux of the Judge’s reasoning was that the Owners’
argument ignored the fact that what the vessel at the relevant time was supposed
to be doing was not proceeding towards Shanghai, but proceeding to
Shanghai, in accordance with Charterers’ order to discharge her cargo there
and load other cargo. The vessel was operating in accordance with Owners’
orders at that time, not those of the Charterers, whether or not she was also
‘efficient’ for the purposes of a voyage to Shanghai.

The important question for the Judge to ask was under what
instructions the vessel was operating at that time. The instructions were that
the vessel was not voyaging to the Charterers’ discharge port, and, in the
Judge’s opinion, in those circumstances when she was voyaging on 22 and 23
September, after leaving Yokohama, she was not carrying out the Charterers’
instructions and not providing them with the service that she was supposed to
supply them. This was partly because of the damage, but, more significantly,
because the existence of that damage had led to instructions from Class that she
should not go to Shanghai but, on the contrary, that she should discharge the
entirety of the cargo somewhere else, namely Hong Kong.

The Judge indicated that, when seeking to define the underlying
commercial purpose of the charter, consideration was better directed towards the
fact that the vessel was hired to comply with the Charterers’ orders to
provide them with the trading opportunities to travel to specified ports where
cargo could be loaded and discharged. The Judge criticised evaluation by
reference to whether or not the vessel was neutrally travelling along a route,
whether a common route or otherwise, because such an approach failed to provide
the level of legal certainty required by commercial parties. Such an approach
would lack legal certainty because the route adopted by vessels to steam to
certain locations involves a choice of routes dependent upon all kinds of
matters such as time of year or climatic and trading conditions. To adopt a
concept such as factual geographical reference to the direction in which
direction the vessel was voyaging would not – in the Judge’s view - create
certainty but could well create the reverse.

Comment
The underlying reasoning of the Judge hinged on the vessel complying with
Charterers’ orders as a matter of fact, whilst being at the same time in an
efficient state for those purposes. The fact that the vessel is efficient to
comply with orders is therefore irrelevant if they are the orders of the Owners
and contrary to the Charterers’ orders. Given the underlying commercial
purpose of the charter, there would be little sense in the vessel being on hire
at the expense of the Charterers for a period where the Owners’ underlying
intention had never been to use her for Charterers’ purposes. Equally,
adopting the alternative approach would have meant that a vessel would
technically go back on hire for a very short duration simply by coming out of a
harbour for a few hundred metres despite her doing so for the underlying
purposes of the owners.

The Judge had interestingly noted that the answer might well
have been different if the vessel had already set out from Yokohama before a
decision was made to change her destination while en route. The Judge considered
that in those circumstances, until that decision was made, the vessel would have
been carrying out the Charterers’ orders, so that the vessel would remain on
hire until that time. While this conclusion follows as a matter of logic from
the Judge’s reasoning, this statement of opinion was not strictly necessary
for the purpose of determining the question before the court.

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